Brusco v. WIP Moonachie LLC

Decision Date01 September 2020
Docket NumberCivil Action No. 18-1961
PartiesANTHONY BRUSCO, Plaintiff, v. WIP MOONACHIE LLC, et al., Defendants.
CourtU.S. District Court — District of New Jersey
OPINION

ARLEO, UNITED STATES DISTRICT JUDGE

THIS MATTER comes before the Court by way of Defendants WIP Moonachie LLC's ("WIP") and Woodmont Industrial Partners LLC's ("Woodmont" or, with WIP, "Defendants") Motion for Summary Judgment on Plaintiff Anthony Brusco's ("Anthony" or "Plaintiff") claims. ECF No. 71. Plaintiff opposes the Motion, ECF No. 78, and cross-moves for summary judgment as to Count I of his Complaint and Defendants' counterclaims, ECF No. 72. For the reasons that follow, Defendants' Motion is GRANTED, and Plaintiff's Motion is GRANTED IN PART and DENIED IN PART.

I. FACTUAL BACKGROUND1

This matter involves a dispute over $900,000 held in escrow following the sale of commercial real estate at 77 Moonachie Avenue, Moonachie, New Jersey (the "Property"). See generally Compl., ECF No. 1; Ans. with Counterclaims, ECF No. 10.2

Prior to the sale at issue in this litigation, 77 Moonachie Owners Corp. ("Owners Corp.") owned the Property and leased it to a printing company, Earth Color, Inc. ("Earth Color" or the "Tenant").3 Def. SOMF ¶ 1. Plaintiff, his son Nicholas Brusco ("Nicholas"), and other members of the Brusco family owned and operated Owners Corp.4 Id.

In early 2016, Earth Color moved its operations to Parsippany, New Jersey, while still maintaining the Lease on the Property, and Owners Corp. put the Property up for sale. Id. ¶ 5. Benjamin Rosen ("Rosen"), Director of Acquisitions for Defendants, investigated the potential purchase of the Property in the spring of 2016. Id. ¶¶ 6-7.

On March 29, 2016, Nicholas sent Rosen an email laying out "three purchase options to consider." Id. ¶ 8. "Option 1" involved a sale of the Property, with no tenant, for $7,600,000. Id. "Option 2" involved retaining Earth Color as a tenant, with $8,100,000 due at closing, plus $1,000,000 paid in twenty-four monthly installments "for each month that Earth Color . . . continues to pay its full rent under the existing lease." Id. "Option 3" provided that Owners Corp. would "work out [a] lease buy-out with Earth Color to deliver [the Property] free of tenant," and that if the sale could close before August 1, 2016, the purchase price would be $7,600,000, and if the sale could not close before August 1, free of the Tenant, then the deal would convert to Option 2. Id.; see also Santola Decl., Ex. B (the "March 29 Email"), ECF No. 71.3.

On March 31, 2016, Owners Corp. selected Option 2 and entered into a letter of intent to sell the Property to Defendants subject to the Lease, for a purchase price of $8,100,000 at closing and $1,000,000 in quarterly installments. Def. SOMF ¶ 10; Santola Decl., Ex. C (the "LOI"). The LOI provided Defendants with twenty-five days to conduct due diligence on the purchase (the"Diligence Period"). Def. SOMF ¶ 11.5 Defendants conducted extensive diligence on the Property. See Pl. SOMF ¶¶ 8, 12-17 (explaining that Defendants "prepared detailed analyses for multiple purchase scenarios including purchase of the Property with a paying tenant, with the tenant failing to pay any rent at all post-closing, and with Tenant filing bankruptcy" and "openly discussed" these options with Owners Corp.), 24-26 (describing contacts between Defendants and the Tenant during the Diligence Period).

On April 21, 2016, Nicholas forwarded Defendants a proposed Lease termination agreement from Nate Modugno ("Modugno"), Earth Color's Chief Financial Officer ("CFO"), under which Earth Color would pay $2 million to end the Lease (the "Proposed Termination Agreement"). Def. SOMF ¶ 12; see also Santola Decl., Ex. D (the "April 21 Email").6

On or about May 6, 2016, Woodmont and Owners Corp. entered into a sales agreement to purchase the Property. Def. SOMF ¶ 17; Santola Decl., Ex. A (the "Sales Agreement"). Section 1.2 of the Sales Agreement sets the purchase price at $9,100,000 "if the Lease remains in effect at the closing" or $7,600,000 if, before the closing, "[Owners Corp.] and [Earth Color] enter into an agreement for the termination of the Lease," and Earth Color vacates the Property. Sales Agreement § 1.2(a). Provided that Earth Color terminated the Lease, Owners Corp. was "entitled to receive and retain exclusively for its own account any and all consideration payable . . . in connection with any Lease Surrender Agreement." Id. Owners Corp. also "advise[d]" Woodmont that it "w[ould] seek approximately $2,000,000 of such consideration from [Earth Color] (althoughthe final amount may be more or less)" and "[Woodmont] shall not have . . . any interest in any such consideration." Id.

The Sales Agreement included a "deferred payment provision," under which Woodmont would place a $900,000 letter of credit in escrow if the Lease remained in effect at closing (the "Escrow Fund"). Def. SOMF ¶ 19; Sales Agreement § 12.23(a)-(c).7 Woodmont agreed to pay Owners Corp. the $900,000 over "eight quarterly installments" while Earth Color continued to pay rent (the "Quarterly Payments"). Sales Agreement § 12.23(c). The Quarterly Payments were immediately due in full if, among other things, "the Lease [was] terminated or surrendered in whole or in part pursuant to a written agreement between [Earth Color] and [Woodmont]" or "[Woodmont] [sought] a warrant or court order for the eviction or dispossession of [Earth Color] . . . unless [Woodmont] ha[d] timely commenced and thereafter diligently and continuously pursue[d] through all appeals . . . the legal proceeding to recover past due Base Rent described in Section 12.23(e)," subject to certain limited exceptions. Id. § 12.23(d) (emphasis in original). The DPA would suspend the Quarterly Payments if Earth Color failed to pay any rent due, provided Woodmont promptly sent Earth Color a default notice and timely commenced a legal proceeding to collect the rent owed. Id. § 12.23(e).8

On June 22, 2016, the parties closed on the Property and Owners Corp. assigned the Lease to Defendants. Santola Decl. ¶ 29, ECF No. 71.2. On that same day, Woodmont assigned its rights under the Sales Agreement to WIP. Pl. SOMF ¶ 3.

On July 1, 2016, Earth Color failed to pay rent. Def. SOMF ¶ 27. On July 15, 2016, Defendants issued to Earth Color a demand for payment of outstanding rent. Id. ¶ 28; see also Santola Decl., Ex. H (the "Demand for Payment"). Based on contemporaneous emails dated July 11, 2016, Earth Color indicated to a WIP employee that it had "no intention of paying July Rent." Santola Decl., Ex. I at WIP000858; Santola Decl. Ex. J at WIPGRS000010. By letter dated July 25, 2016, Defendants informed Earth Color that it was in default and that Defendants were terminating the Lease. Def. SOMF ¶ 29; see also Santola Decl., Ex. K (the "Termination Letter").9

On August 9, 2016, Defendants filed an action for possession of the Property, and on September 10, 2016, they filed an action for rent collection under the Lease in the Superior Court of New Jersey, Bergen County (the "Superior Court"). Def. SOMF ¶ 30. Defendants kept Owners Corp. "apprised of the status of" these actions, Def. SOMF ¶ 35, and, because Defendants viewed Earth Color as in default, did not make the Quarterly Payments to Owners Corp., id. ¶ 32.

On August 25, 2017, while its rent collection action against Earth Color was ongoing, Defendants sold the Property to a third party. Id. ¶ 37.

By letter dated September 8, 2017, Earth Color's bankruptcy counsel indicated that the company had over $50 million in secured debts and unsecured claims of approximately $11 million. Id. ¶ 38; Santola Decl., Ex. O (the "September 8 Letter"). Defendants determined that their only possibility of recovery was to settle the rent collection action or to pursue a claim for successor liability against Mittera, the entity purchasing Earth Color's assets in bankruptcy.See Def. SOMF ¶¶ 39-41, 43. In October 2017, Defendants alerted Owners Corp. to this situation and indicated that they would pursue a settlement with Earth Color. Id. ¶ 43.

By letter dated October 31, 2017, Defendants informed Owners Corp. that they had reached a settlement with Earth Color for $142,500. Id. ¶ 45; Santola Decl., Ex. Q. The settlement was executed on November 1, 2017. Def. SOMF ¶ 45; Santola Decl., Ex. R (the "Settlement Agreement"). Owners Corp. objected to the Settlement Agreement, Def. SOMF ¶ 50,10 and on November 3, 2017, counsel for Owners Corp. requested that the escrow agent release the $900,000 to Owners Corp., Compl., Ex. G (the "November 3 Letter"). Owners Corp. subsequently dissolved and assigned its rights to Plaintiff. See Compl. ¶ 4.

II. PROCEDURAL HISTORY

Plaintiff filed this action on February 12, 2018. See Compl. The Complaint asserts three causes of action: (1) breach of the Sales Agreement flowing from Defendants' termination of the Lease, id. ¶¶ 25-45 ("Count I"); (2) fraudulent inducement, id. ¶¶ 46-52 ("Count II"); and (3) unjust enrichment, id. ¶¶ 53-57 ("Count III").

On April 11, 2018, Defendants filed an Answer with two counterclaims. See ECF No. 10. The first counterclaim alleges that Plaintiff committed fraudulent inducement by representing that Earth Color would either continue to pay rent or was willing to pay over $1 million to terminate the Lease. See Counterclaim ¶¶ 23-26 ("Counterclaim I"). The second counterclaim alleges tortious interference with the Escrow Fund and Defendants' Letter of Credit. Id. ¶¶ 27-31 ("Counterclaim II").

Following discovery, Defendants moved for summary judgment on Counts I-III. See ECF No. 71. Plaintiff opposed this Motion, ECF No. 78, and cross-moved for summary judgment on Count I and Counterclaims I-II, ECF No. 72. Defendants opposed Plaintiff's Cross-motion. ECF No. 79.

III. LEGAL STANDARD

Pursuant to Federal Rule of Civil Procedure 56(c), a motion for summary judgment will be granted if the pleadings, depositions, answers to interrogatories, and admissions...

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